Social Security and Savings

November 1, 1999

The Consumer Federation of America released a study on American's attitudes toward saving. It found that many Americans feel their best chance of building wealth lies in winning a sweepstakes or filing a lawsuit rather than through investing a little money each month. According to Census Bureau data, the median savings of American households was only $1000. Cato's Mike Tanner sees Social Security reform as a way out: "Many Americans don't see the benefits of saving because high Social Security taxes prevent them from doing it. If workers could deposit their payroll taxes in personal retirement accounts where they would build real wealth, we might see attitudes toward savings change."

The Consumer Federation study also found that fewer than one-third of workers knew that saving $50 per week at 7 percent interest would build to over $285,000 after 40 years. "Maybe that's because the average worker pays over $75 per week in Social Security taxes and won't see anywhere near $285,000 in retirement benefits. Many minorities, who have shorter life-spans, won't see a dime," Tanner said.

For the benefits of Social Security privatization for low-income workers, see Tanner's "Privatizing Social Security: A Big Boost for the Poor."

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